3 Example: A radio installed in an automobile Next PageClick HereDirect MaterialsThose materials that become an integral part of the product and that can be conveniently traced directly to it.Example: A radio installed in an automobile
4 Example: Wages paid to automobile assembly workers Next PageClick HereDirect LaborThose labor costs that can be easily traced to individual units of product.Example: Wages paid to automobile assembly workers
5 Manufacturing Overhead Next PageClick HereManufacturing OverheadManufacturing costs that cannot be traced directly to specific units produced.Examples: Indirect labor and indirect materialsWages paid to employees who are not directly involved in production. Examples: maintenance workers, janitors and security guards.Materials used to support the production process. Examples: lubricants and cleaning supplies used in the automobile assembly plant.
6 Materials waiting to be processed. Completed products awaiting sale. Next PageClick HereBalance SheetMerchandiserCurrent Assets:CashReceivablesPrepaid expensesMerchandise inventoryManufacturerCurrent Assets:CashReceivablesPrepaid ExpensesInventoriesRaw MaterialsWork in ProcessFinished GoodsMaterials waiting to be processed.Partially complete products – some material, labor, or overhead has been added.Completed products awaiting sale.
7 Next PageClick HereThe Income StatementCost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers.
8 Manufacturing Cost Flows Next PageClick HereManufacturing Cost FlowsIncome Statement ExpensesBalance Sheet InventoriesCostsMaterial PurchasesRaw MaterialsDirect LaborWork in ProcessManufacturing OverheadCost of Goods SoldFinished GoodsSelling and Administrative ExpensesSelling and AdministrativePeriod Costs
9 Product Costs – Raw Materials Next PageClick HereProduct Costs – Raw MaterialsBeginning inventory is the inventory carried over from the prior period.
10 Product Costs – Direct Materials Next PageClick HereProduct Costs – Direct MaterialsAs items are removed from raw materials inventory and placed into the production process, they are called direct materials.
11 Product Costs – Total Manufacturing Costs Next PageClick HereProduct Costs – Total Manufacturing CostsConversion costs are costs incurred to convert the direct material into a finished product.
12 Product Costs – Goods in Process Next PageClick HereProduct Costs – Goods in ProcessAll manufacturing costs incurred during the period are added to the beginning balance of work in process.
13 Product Costs – Cost of Goods Manufactured Next PageClick HereProduct Costs – Cost of Goods ManufacturedCosts associated with the goods that are completed during the period are transferred to finished goods inventory.
14 Product Costs – Cost of Goods Sold Next PageClick HereProduct Costs – Cost of Goods Sold
Your consent to our cookies if you continue to use this website.